Microsoft PowerPoint - 4. Cigfaro presentation 4 June 2019ON GRANTS
WEDNESDAY 4 JUNE 2019
core functions performed
non-core functions
“grants” Received by municipalities
Taxable supplyGrantPayments, other than for
service charges, by provincial
• Even if amount is reflected in a
government gazette as grant, the
amount receivable by the
for VAT purposes
the municipality receiving the
or for the inducement of the
supply of goods and services? –
i.e. is there an actual supply of
services in return for payment
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3
Housing Programme (NHP)
{Human Settlement Development
for VAT purposes
specifically excluded from the
• NHP payments represents
of services deemed to be made to
the state organ making the
payment – ordinarily zero-rated
Taxable supplyGrant“Grants-in-aid” payments i.t.o s67
of the MFMA always qualify as
“grants” for VAT purposes & the
entities that receive the funds does
not have to declare output tax
• Not all the time!
• E.g. where municipality makes
“grants-in-aid” payments to local
are performing services to the
municipality for the payments -
municipality)
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5
Taxable supply • Means any supply of goods or services which
is chargeable with tax under the provisions of section 7(1)(a)…;
• S7(1)(a): Output tax payable on the supply by any vendor of goods or services supplied by him on or after the commencement date in the course or furtherance of any enterprise carried on by him
• Principle outcome : 15% output tax payable
Grant • “grant” means any appropriation, grant in aid,
subsidy or contribution transferred, granted or paid to a vendor by a public authority, municipality or constitutional institution..
• Does not include: a payment received for actual supply of any goods or services to public authority
• Principle outcome : zero % output tax payable
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Municipality performing Sch 4A or 5A function formally
assigned to them
5A function on an agency basis
Function schedules to the Constitution
Taxable supply • Means any supply of goods or services which
is chargeable with tax under the provisions of section 7(1)(a)…;
• S7(1)(a): Output tax payable on the supply by any vendor of goods or services supplied by him on or after the commencement date in the course or furtherance of any enterprise carried on by him
• Principle outcome : 15% output tax payable
Grant • “grant” means any appropriation, grant in aid,
subsidy or contribution transferred, granted or paid to a vendor by a public authority, municipality or constitutional institution..
• Does not include: a payment received for actual supply of any goods or services to public authority
• Principle outcome : zero % output tax payable
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• Provincial dept functions – e.g. Provincial roads and traffic
• Municipal functions – e.g. Local tourism
• National & provincial dept functions – e.g. housing
Sch 4A
Sch 4B
Sch 5B
Sch 5A
Taxable supply • Means any supply of goods or services which
is chargeable with tax under the provisions of section 7(1)(a)…;
• S7(1)(a): Output tax payable on the supply by any vendor of goods or services supplied by him on or after the commencement date in the course or furtherance of any enterprise carried on by him
• Principle outcome : 15% output tax payable
Grant • “grant” means any appropriation, grant in aid,
subsidy or contribution transferred, granted or paid to a vendor by a public authority, municipality or constitutional institution..
• Does not include: a payment received for actual supply of any goods or services to public authority
• Principle outcome : zero % output tax payable
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agreement of Cabinet Minister or Provincial MEC
with the municipal council
Assigned function must be performed in terms of
an Act of Parliament or Provincial Act
If function not performed i.t.o an Act of Parliament or Provincial Act, than “Agency services” are rendered
2. Must be i.t.o of an Act of Parliament or Provincial Act
Assignment takes effect when it is proclaimed by the President or Premier of province
3. Proclamation
“If provincial activity
zero-rated “grant”
White paper
on local
purposes”
“Agency payments are
Commissioner, South African
ZACC 11
and deliver food to public schools by using
other sub-contractors, for which the
applicant received a service fee
Trust rendered a ‘comprehensive aero-medical
service’ on behalf of the provincial health
departments to patients
provincial department, but was rendering a
service to the provincial department –
service fee subject to output tax
Trust rendered actual services to provincial
department and not deemed services – VAT is
payable on payments received by Trust –
Payments NOT zero-rated
parties to be regarded as an agent
Where there is an actual supply of services to
organs of state, VAT must be paid – s8 of VAT Act
is only effective when there is no actual supply
but a deemed supply i.t.o of VAT Act– s8(5)(A)
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Taxable supply • Means any supply of goods or services which
is chargeable with tax under the provisions of section 7(1)(a)…;
• S7(1)(a): Output tax payable on the supply by any vendor of goods or services supplied by him on or after the commencement date in the course or furtherance of any enterprise carried on by him
• Principle outcome : 15% output tax payable
Grant • “grant” means any appropriation, grant in aid,
subsidy or contribution transferred, granted or paid to a vendor by a public authority, municipality or constitutional institution..
• Does not include: a payment received for actual supply of any goods or services to public authority
• Principle outcome : zero % output tax payable
11
Taxable supplyGrant
Input tax principles: non-core functions performed by municipality
Taxable supplyGrant
qualifying VAT
qualifying VAT
qualifying VAT
The takeaway as it relates to non-core functions performed by
municipalities
received by municipalities
Used in course of Sch 4A & 5A
functions performed by municipality
Amount genuine “grant” – no output tax
payable
Amount NOT “grant” – output
functions of municipality
payable